Ilori, A.E., Paez-Farrell, J. and Thoenissen, C. (2020) Fiscal policy shocks and international spillovers. Working Paper. Sheffield Economic Research Paper Series, 2020010 (2020010). Department of Economics, University of Sheffield ISSN 1749-8368
Abstract
The domestic and international transmission mechanism of fiscal policy shocks are analysed in large developed economies. Using a Bayesian VAR approach, we find that fiscal expansions are associated with increases in output, private consumption and, in many cases, with an in- crease in private investment. The terms of trade, which affect the international transmission of fiscal policy shocks, are found to depreciate in response to a fiscal expansion, thus transferring some of the increased domestic purchasing power abroad. A US government spending shock is expansionary for all non-US G7 members. A German government spending shock is expansion- ary for most, but not all European economies, both within and outside the Euro Area. The dynamics of the BVAR are rationalised using a dynamics stochastic general equilibrium model where heterogeneous households and firms face borrowing constraints.
Metadata
Item Type: | Monograph |
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Authors/Creators: |
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Copyright, Publisher and Additional Information: | © 2020 The Author(s). For reuse permissions, please contact the Author(s). |
Keywords: | Fiscal Policy; Bayesian VAR; DSGE modelling; International business cycles; spillovers |
Dates: |
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Institution: | The University of Sheffield |
Academic Units: | The University of Sheffield > Faculty of Social Sciences (Sheffield) > Department of Economics (Sheffield) |
Depositing User: | Symplectic Sheffield |
Date Deposited: | 07 Dec 2020 08:39 |
Last Modified: | 07 Dec 2020 09:15 |
Published Version: | https://www.sheffield.ac.uk/media/20383/download |
Status: | Published |
Publisher: | Department of Economics, University of Sheffield |
Series Name: | Sheffield Economic Research Paper Series |
Related URLs: | |
Open Archives Initiative ID (OAI ID): | oai:eprints.whiterose.ac.uk:168715 |